Google-Microsoft search war hits new heights

The already heated online search war cranked up a notch in recent days as Google officials openly blamed Microsoft for triggering the European Commission's antitrust probe into its activities.

Analysts say that if true, Microsoft's decision to seek an EC antitrust investigation into Google activities would mark the latest move in its continuing effort to knock the high-riding search vendor down a peg or two.

The EC announced late last month that it had launched an antitrust investigation of Google based on complaints from three firms, two with connections to Microsoft.

Over the past year or so, Microsoft has been spending a lot of money and development resources to capture some of Google's 60% share of the search market. But while the release of Microsoft's Bing search engine last summer did garner a lot of attention, Google still maintains the dominant position it has held in the search market for years.

Now Microsoft appears to be taking a different route -- creating a legal storm that would distract Google officials and keep them from focusing on the future of the business.

"Against Google's level of control," any effort to compete directly in the search business "could take [Microsoft] a lot of years and a massive investment," said Rob Enderle, an analyst with the Enderle Group. "This approach [using legal means to distract Google] potentially shortens their time and the investment.

"The disparity in market share is simply too large for them to close the gap unless Google makes a massive sustained mistake or is hit by a successful antitrust action," he added.

Whit Andrews, an analyst at Gartner Inc., said it's no surprise that the Microsoft-Google battle would enter a new realm, in this case the courtroom.

"I think that search is the most important crossroads in the history of information," Andrews said. "I expect the striving conflict among the most powerful companies and countries in the world to intensify."

In a conference call with journalists last week, Julia Holtz, Google's top antitrust lawyer, blamed Microsoft for sparking the probe. "Microsoft is our competitor, and that explains many actions," she said.

She noted that the three companies whose complaints triggered the investigation included Ciao, a German company acquired by Microsoft in 2008.

"Ciao [was] a long-time AdSense partner of Google's, with whom we always had a good relationship," Holtz said in a blog post. "However, after Microsoft acquired Ciao in 2008, we started receiving complaints about our standard terms and conditions. They initially took their case to the German competition authority, but it now has been transferred to Brussels."

She also noted that a second complainent, Foundem, a U.K. price comparison site, is a member of of a trade group called iComp , which is largely funded by Microsoft.

French legal search engine ejustice.fr was the third company whose complaint against Google is under investigation by the EC.

Microsoft responded to Holtz' charge by contending that Google responded to the EC investigation by pointing fingers rather than answering the charges.

Dave Heiner, vice president and deputy general counsel at Microsoft, added in a blog post that "Google hasn't been shy about raising antitrust concerns about Microsoft in the last few years. Ultimately what's important is not who is complaining, but whether or not the challenged practices are anticompetitive."

Enderle noted that in the past, Microsoft frequently complained that rivals like Oracle Corp., Sun Microsoystems Inc. and Google were behind antitrust probes that targeted its actions.

Stuart Williams, an analyst with Technology Business Research, said users shouldn't assume that Microsoft's apparent legal challenge to Google indicates that it's decided that Bing is not up to the challenge of taking on the search giant. It simply means that Microsoft is using all the tools in its arsenal.

"Both vendors have strong search technologies; the cases are not indications that either is throwing in the towel," said Williams. "Large corporations can fight in the market as well as in the courtroom."

The analysts do note that no matter who prompted the antitrust investigation, Google should prepare itself for the legal challenge.

"If you think about it, the validity of the charge should be based on the validity and substance of the evidence, not on whether a large competitor brought it to the enforcement agency's attention," said Enderle.

"I think this is a natural progression. Google's should have been to anticipate that the fight they helped start with Microsoft would likely come back to haunt them. It's like firing a nuclear bomb with the belief that the other side won't turn around and use it against you."

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